Author Archives: Ruairi Macdonald

Are we going to see a dance-off in 2016? #IDdanceoff

Happy New Year. Perhaps you were at an epic, boozy party over the holiday when the music stopped, the lights went on and you gazed in wonder and horror at the wreckage all around you. During the 2008 financial crisis, when the music stopped and the lights went on, the people trying to save our lurching economies had trouble identifying the revelers, their level of intoxication, and even the size of their tab.

Trying to prevent this problem from happening ever again inspired the development of the first international open, non-proprietary source identifier for companies called the Legal Entity Identifier (LEI).

Corporate identifiers are also vital for tracking government spending. Governments craft trillions of dollars of contracts, grants, and other deals a year. To track all these interactions, it’s hugely helpful to have governments’ record the corporate ID of entities that are receiving federal funds through contracts, grants or other means to know who is getting taxpayer money, how much, what for, and whether it is being spent honestly and effectively. It’s also important for businesses, especially small businesses, who want to understand the government market. The ID is like a barcode for all that entity’s transactions with the government. (The Open Contracting Data Standard – our open data standard to track all this spending – is specifically designed to accommodate different identifiers from different governments.)

The US government has given notice that it will “establish a transparent process for exploring potential alternatives to existing entity identifiers” and remove reference to the current proprietary ID in the Federal Acquisition Regulations (FAR). We see a dance off coming and, so we are starting our blog this year with a call for action: Civil society should insist upon a role in the selection and maintenance of an open, non-prioritary corporate ID for recipients of US taxpayer money.

This may sound like a technicality, but it has significant potential implications for open data and corporate transparency globally.

The Dance-Off Contestants

This issue is now center stage as the White House Office of Management and Budget (OMB) and the U.S. Treasury Bureau of the Fiscal Service (Fiscal Service) implement the Digital Accountability and Transparency Act of 2014 (DATA Act). (See this DATA Act information page.) The DATA Act requires all federal spending to be published according to new data standards on a new USASpending.gov site and the entity identifier is a critical data element.

To that end, US government is currently receiving comments on a notice about removing the proprietary DUNS® number from the Federal Acquisition Regulations (FAR) and consideration of an alternative, non-proprietary identifier. This is major progress.

Though not explained in the notice, the U.S. Government’s choice appears to be between LEI, the Commercial and Government Entity Code (“CAGE code”) and DUNS®. It’s not a straight choice as each of which may evolve in some way through this process. It’s more a kind of dance-off. We want civil society and public interest organisations to circle round and check out their moves.

According to the notice, analysis of alternatives is anticipated to be completed in Fiscal Year 2017, which begins October 2016. The analysis is important because the identifier selected may create a new international norm in both its use and its governance. The selection process and the subsequent governance and maintenance should include civil society organisations.

When it comes to US government spending, companies have long been identified by a proprietary number, a DUNS® number, from storied American public company Dun & Bradstreet Inc. (D&B). D&B boasts that DUNS® maintains accurate and timely information on over 250 million global businesses.

Remarkably, DUNS has been expressly included in US regulations at FAR Subpart 605(b). As a result, if the government or anyone else wants to perform new analysis of federal spending using this official government identifier, they need permission from D&B. This private monopoly hardwired into government data has become increasingly problematic in a world of open government and open data. The problem has been highlighted by the Government Accountability Office (GAO) and there have been calls to ”#DumpDUNS” from non-profits and industry associations.

The new DATA Exchange standards refer to DUNS®, but promise to consider a non-proprietary standard. This promise is remade by the FAR Council agencies in the notice inviting comments.

The international new star: LEI

The winner may well be the LEI given that it was specifically set up to do exactly this during the financial crises. It is a global solution with the support of the G20 and the international Financial Stability Board (FSB).

The Global LEI System (GLEIS) has a tiered structure (warning, plenty of additional acronyms below to add to your jargon): At the top, there’s the Regulatory Oversight Committee (ROC), which has representatives of over 80 public regulators. The central operations are run by the Global LEI Foundation (GLEIF), a Swiss nonprofit. On the ground, the Local Operating Units (LOUs) assign LEIs to corporate entities.

While also part of the U.S. Department of Treasury, the Office of Financial Research is different from the Fiscal Service working on DATA Act, but presumably this gives LEI some American credibility.

GLIES reports that about 400,000 LEIs have been issued to firms in more than 180 countries, which is not bad for a standard only a few years old.

The line dancing giant: CAGE from DoD DLA

Every recent awardee of federal money already has a Commercial and Government Entity Code (“CAGE code”). CAGE codes are received through registration in the System for Award Management (SAM). CAGE is already imbedded in the FAR at Subpart 4.18 and is now supposed to be on all contracts. CAGE codes are also starting to be used to identify other corporate owners of contracting companies, which is very important for managing risk in your supply chain and tackling abuses of power, money laundering, and financial crime generally. (See this great blog making the business case for going further and tracking beneficial ownership information.)

However, a potential problem with the CAGE code is that it’s run by the U.S. Department of Defence (DoD), Defense Logistics Agency (DLA), who seem somewhat, well, “cagey” about the whole CAGE oversight process. It is not an open, non-proprietary standard. This is the DLA webpage on CAGE. Also, it’s not very foreigner friendly, which is important if we want to track federal spending in, for example, international development. If you are a foreign entity, then you need to go through the North Atlantic Treaty Organisation (NATO) to get a NCAGE number. It should be easier for foreigners to join in. Finally, one wonders how the DoD DLA and the Treasury Fiscal Service will coordinate through this selection process. Can the DoD pas de deux?

The Outcome?

As the crowd circles and contest begins, LEI seems the likely winner. DoD DLA is probably the contestant that most understands the importance of knowing who’s getting your money and who’s in your supply chain, but they may not have the right transparency and engagement moves. However, just because DUNS® is losing its enviable mandate in the FAR, it does not mean that D&B cannot evolve their business model and perhaps even grow through this shift. Afterall, D&B is a great American company that has been in the data business for over 150 years and has spun off other data giants like Nielsen and Moody’s. In this light, D&B’s chances don’t look so bad. If there is a #FedMoneyID-Danceoff, D&B may move more nimbly than both the GLEIS and DoD DLA.

Whatever the outcome, open government civil society organisations need to be engaged in the decision process and in the subsequent governance process to make sure the result is a genuine open source, non-proprietary identifier useful for analysing government datasets and cross referring data and deconstructing corporate hierarchies. Please join the OCP in asking for a seat at the table. And please do so this week, so you can be part of our submission next Tuesday, January 19.

PS For a deeper and more technical analysis of the alternatives, see this excellent report by American Council for Technology-Industry Advisory Council (ACT-IAC).

NB This post has been necessarily horribly filled will acronyms so here is a list for your reference:

At the Open Contracting Partnership, we are excited by NAP 3.0’s broad scope, the attention to subnational government initiatives, and the promotion of the 2030 Agenda for Sustainable Development. Of course, we are most excited about and focused on the inclusion of fiscal transparency commitments.

The NAP is intended to be a living document. We view the fiscal transparency commitments in NAP 3.0 as the beginning of a conversation. This conversation is about opening-up public contracting through disclosure, open data, and better business and civic engagement. The living, iterative nature of the NAP presents an opportunity to deepen dialogue about the benefits of open contracting to U.S. acquisitions professionals, government program staff and, most importantly, U.S. citizens.

To carry that momentum forwards, we propose four next steps to open up the U.S. public procurement system as we move to NAP 3.1.

They are:

(1) Dial up the ambitions on public openness;(2) Add more engagement and participation;(3) Add the who and when;(4) Collaborate on an Open Contracting Data Standard (OCDS) pilot to show the benefits of public transparency in action.

These will help the NAP deliver on its ambitions and draw from U.S. civil society’s model plan, to which we contributed.

Step 1: Dial up public openness

The commitment in NAP 3.0 is to “Centralize Integrity and Ownership Information of Contractors,” does not yet clearly promise to open anything to the public. The Administration has committed to facilitate the display of “integrity information” about Federal contractors and grant recipients. For contractors, this will include additional information on labor violations and identification of parent and subsidiary organizations. It will also include information about corporate contractor performance in order to give acquisition officials a comprehensive understanding of the performance and integrity of a corporation in carrying out Federal contracts and grants.

The System for Award Management is an essential tool for acquisition officials to ensure that agencies are not contracting with disbarred, suspended, or unqualified high risk contractors. However, competing businesses, competing grantees, civil society and end-users of goods and services could efficiently provide information to acquisition professionals to help them evaluate risks. This receipt of information brings us to Step 2.

Step 2: Boost participation and engagement in contracting

The U.S. NAP can better realise the power of public engagement and participation in government spending. Under the commitment to “Publish Standardized, Reliable, and Reusable Federal Spending Data,” the U.S. Department of the Treasury and the White House Office of Management and Budget (OMB) will leverage technology to engage stakeholders and adopt a highly participatory and innovative approach to “re-imagine” USAspending.gov and make spending data more accessible and searchable.

Participation and innovation are definitely needed in the development of the new USASpending.gov. Treasury and OMB have also done an excellent job so far since the enactment of the Digital Accountability and Transparency Act of 2014 (DATA Act). (See for example the Federal Transparency GitHub.)

However, web tool development is only one place where participation can add value. We have a much more transformational suggestion: USASpending.gov itself could be a participation tool.

Open contracting is about receiving feedback and engaging with stakeholders in the planning, award, and performance of grants and contracts, not just publishing information. Re-imagine USAspending as in the basis of a civic participation tool: it needs to be able to listen, not just to talk. USAspending could streamline feedback loops between acquisition staff who buy, government program staff who use, and the citizens who are served.

Similarly, under the commitment to “Improve the Usability of Public Procurement and Grants Systems and Make it Easier to Identify Awardees,” the U.S. will leverage digital technologies and stakeholder feedback to improve the effectiveness of the public procurement and grants systems and foster openness and competition. It’s great that the U.S. will follow best practices and take stakeholder feedback while improving, but the outcome of this improvement should be systems that themselves allow procurement officials and program staff to receive feedback.

The NAP 3.0 itself has an entire section on participation in other areas of government. We suggest making sure it’s firmly embedded where it matters most to citizens – our tax money spent on services to us.

Just who in the United States will be working on this brings us to Step 3.

Step 3: Who and When

The NAP should identify a specific person, or at the least office, responsible for engaging with civil society on open government procurement reform issues. Presumably, this would be the Office of Federal Procurement Policy (OFPP) within OMB.

It is clear that Treasury and the OMB are working on USASpending.gov committment, which is the role given to them by the DATA Act. However, the Usability of Systems commitment and the Centralising Integrity and Ownership Information commitment do not assign implementation responsibility beyond “the United States” and “the Administration” respectively.

OFPP is a small office in the White House Office of Management and Budget. If OFPP needs more empowerment, perhaps an update to the Federal Acquisition Regulations (FAR) council and/or rule-making process might help. If OFPP needs more resources to engage civil society and agency personnel on these issues, then perhaps they should get more funding – perhaps some of the “industrial funding fees” charged by agencies on top of contractors prices for using their acquisition vehicles.

This open government procurement point person could then work with civil society to clarify milestones and timeframes on implementation of the 3.0 commitments and any new 3.1 interactions. (This would be in line with OGP guidance on inclusion of milestones and timeframes in NAP commitments.)

Step 4: Pilot the OCDS

The OGP encourages boldness and rates commitments for ambition. Our fourth step for more open U.S. contracting speaks to that. The U.S. government can to join all its interventions together in a more transformational way to share proper reusable open data on public contracting including sharing key documents along the process. Countries like Slovakia are doing this and seeing major benefits, which we have all been hearing about here in Mexico.

The best schema to assist with this is the Open Contracting Data Standard, which is supported by the Open Contracting Partnership (yes, that’s us) as an open, non-proprietary standard. OCDS implementation and attendant stakeholder engagement could be piloted at one specific agency and part of DATA Act implementation and a DATA Act recipient reporting pilot. The U.S. Department of Health and Human Services (HHS) is running a DATA Act pilot in respect of grants. An open contracting pilot at the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) was suggested by the Center for Global Development. Perhaps the HHS DATA Act pilot could be expanded to include publication to OCDS of PEPFAR spending by HHS. There are other options of course. Wherever a U.S. open contracting pilot is held, it needs to involve procurement officials and help them buy better with stakeholder feedback at all stages in the procurement process through efficient, manageable channels. This feedback will help the government get the best deals with the best contractors, buy the right things at the right time, and monitor contractor performance more effectively.

Let’s co-create on open contracting!

The OGP process for developing a NAP is a collaborative “co-creation” with civil society. This is an iterative process. Civil society is ready to co-create and co-innovate on procurement. The ambition in NAP 3.0 now has to be turned into results. Our next steps and ideas for NAP 3.1 will be key to getting better results for citizens from the procurement system. Let’s dial up the openness and the engagement, assign clear responsibility for open government procurement policy, and launch open contracting data pilots in the U.S. as soon as possible.

On October 13, Barbara Byrd-Bennett, the former head of Chicago Public Schools, pleaded guilty to fraud. She lied to colleagues and cheated the internal processes at the Chicago school administration to help her former employer get contracts, most prominently a $20 million sole-source training contract in exchange for kickbacks. The indictment is full of horrible quotes from e-mails about the scheme and how the villains sought to divvy up the proceeds. Of this public contracting disaster, The Economist concluded that “stealing from Chicago’s poorest children (the vast majority of children at the city’s public schools are black or Hispanic and from poor families) is a new low, even by Chicago standards.” Byrd-Bennett will probably get about seven years in prison.

A key question for us at the Open Contracting Partnership is this: Would open contracting have overcome the lies and willfully corrupt actions of this individual?

I think the answer is yes. Let’s look at how.

Of course, Chicago Public Schools already publishes a list of contract awards. In fact, Barbara Byrd-Bennett’s approval of the $20 million sole source contract is open to the public, including the actual contract itself. Such disclosures led Catalyst Chicago journalist Sarah Karp, who is now with the Better Government Association, to raise questions about the contract. In her July 2013 article analyzing the no-bid award, Sarah Karp wrote, “The size and the circumstances surrounding the contract have raised eyebrows among some outside observers.” Aided with some open contracting, Karp’s investigation eventually led to Byrd-Bennett’s fraud being exposed.

Open contracting is about more of this disclosure and data in more useable formats at all stages in the procurement process. This means publishing useful contract planning information and useful contract implementation information. Crucially, Open Contracting is also about getting public feedback and engagement on this information.

“Now you see it, now you don’t” notifications are not enough.

Even now, after the scandal has come to light and after implementing recommendation by a consulting firm after the scandal (you can access the Accenture assessment), planning-stage disclosure at Chicago Public Schools are really poor.

It has a webpage of sole source awards that are to be considered at its next board meeting. At time of writing, there is only one line of information: a potential single source award to the University of Chicago for $300,000, with a description that tells us that this is part of a grant. This much is good.

There is no reference number for any planning document, requirements document, budget line item, or grant number.

Apparently this notice will be lost when it is taken down and replaced by information on the next board meeting.

There is no obvious place for the public to comment on the proposal.

It’s a PDF, so it is not machine-readable.

Review the contractors as much as the kids!

Open contracting provides also useable information about the contract implementation phase, where a lot of things can go wrong. A quick search of data available on the Chicago Public School Board website reveals lots of measuring of schools, teachers, and student performance, which may be important for public confidence. But I can’t find any data on the performance of the contractors who are serving Chicago’s schools, teachers, and students. (If you know where to find this information, please let me know.)

Here’s what’s either missing or at least too hard to find:

No list of performance measures or ratings by contract.

No list of payments by contract.

No obvious place for the public to comment on the goods or services.

Not machine-readable, because it’s not online in any format.

How open contracting can help.

In the Chicago Public Schools corruption scandal, before the $20 million contract was awarded, there was a smaller $2 million sole-source contract for training to the same company. This included $225,000 in settlement payment for work prior to the contract, and then a $225,000 contract extension. There were also concerns that the additional training contracted was redundant to training already purchased and provided. These concerns were not public.

So, how would planning and implementation disclosures and participation have frustrated the award of this $20 million corruption by a bad apple within the system? Training businesses that were excluded from potential competition could have pointed out that they can do the work and their complaints could have been registered. If the funds are coming from a grant program, disappointed and potential grantees could bring the issue to the grant maker. Grant funders – private or federal government programs – could have questioned how their money is being spent. People within the school system, including those for example receiving the training, could say whether they think it’s a waste of money. Journalists (like Sarah Karp) could spot the problem before it gets ten times worse (as it did here).

Chicago Public Schools and other government bodies need stakeholders’ feedback on purchasing plans to avoid mistakes and reduce the risk of corruption. “Now you see it, now you don’t” notifications are not good enough. You also need to measure the performance of the contractors as much as you measure the performance of your kids. It is a sad irony that the noxious $20 million contract was for a training program.

There’s lots of performance data on the education of kids by Chicago schools, but there’s little or no data on Chicago Public Schools staff education by its contractors. Here too, input from the people being serviced helps you understand what’s really going on. Corruption by bad actors high in the command chain within government agencies can’t be addressed only with internal processes. I suspect this is true of every government agency in the world, but certainly, this scandal in Chicago Public Schools shows it is true in US cities.

Better, useable open and shareable data disclosures and stakeholder feedback would have helped prevent such wanton theft from Chicago’s kids and the parents whose taxes fund Chicago Public Schools. The promise of more open contracting can beat bad actors like Barbara Byrd-Bennett.